Ripple concept
Ripple is a privately held company building a payment and transaction network (RippleNet) on top of a distributed ledger database (XRP ledger), formerly known as OpenCoin. Ripple’s main goal is to connect banks, payment service providers and digital asset exchanges to enable faster and more economical global payments.
The history of Ripple
The first idealization of Ripple was done by Ryan Fugger, who developed the first prototype of Ripple, the decentralized digital payment system RipplePay. And the system was put into use in 2005, its purpose is to provide a secure payment solution for the global network.
In 2012, Fugger handed over the project to Jed McCaleb and Chris Larsen, with whom he co-founded the American technology company OpenCoin. At this point, Ripple began its development as an open source payment protocol focused on payment solutions for banks and other financial institutions. In 2013, OpenCoin changed its name to Ripple Labs, and again in 2015 to Ripple.
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Ripple Ledger (XRPL)
Based on Fugger’s work and inspired by Bitcoin, Ripple developed the Ripple Consensus Ledger (RCL) in 2012 and launched its native cryptocurrency XRP (Ripple). Subsequently, the Ripple consensus ledger was renamed the XRP ledger.
Operating as a distributed economic system, XRPL will not only store all financial information of network participants, but will also provide trading services across multiple currency pairs. And XRPL launched by Ripple will also serve as an open source distributed ledger that can realize real-time financial transactions. There is also a consensus mechanism to secure and verify transactions.
Unlike Bitcoin, the XRP ledger is not based on the PoW consensus algorithm, so it does not rely on the mining process to verify transactions. Instead, the network achieves consensus by using its own consensus algorithm, known as the Ripple Consensus Algorithm (RPCA).
XRPL is governed by a network of independent validating nodes that continuously verify transaction records. Anyone can set up and run a Ripple validator, and at the same time they can choose a validator. However, Ripple advises its clients to select nodes from an authenticated trusted list to validate their transactions. And these trusted node lists are called Unique Node Lists (UNLs).
UNL nodes exchange transaction data with each other until they agree on the current state of the ledger. That is to say, a transaction approved by the vast majority of UNL nodes is a valid transaction, and when all nodes apply the same transaction to the ledger, a consensus is reached.
According to Ripple’s official website: Ripple is a private company that developed the open source distributed ledger XRPL. An open-source ledger means that anyone can contribute to a node, and XRPL will continue to operate even if Ripple ceases to exist.
RippleNet
Unlike XRPL, RippleNet is built on XRPL, Ripple’s exclusive payment and transaction network.
RippleNet currently provides three payment solution systems for banks and financial institutions, namely xRapid, xCurrent and xVia.
xRapid
Simply put, xRapid is an on-demand liquidity solution that uses XRP (Ripple) to build a global currency bridge. Both XRP and xRapid rely on the XRP ledger, which allows transactions to be completed faster and with lower fees.
Take a simple example. Bob from Australia wants to send $100 to Alice in India through the financial institution FIN. To execute the transaction, the financial institution FIN used the xRapid solution to create a connection between the source and destination countries. In this way, the FIN institution can convert Bob’s $100 into XRP (Ripple), which provides the necessary liquidity for the final payment. Finally, within seconds, XRP can be converted into Indian rupees and Alice can withdraw the funds from an asset exchange in India.
xCurrent
xCurrent is a solution that provides instant settlement and tracking of cross-border payments for RippleNet users. Unlike xRapid, the xCurrent solution is not based on the XRP ledger and does not use the XRP cryptocurrency by default. xCurrent is built on the Inter-Ledger Protocol (ILP), a protocol designed by Ripple to connect different ledgers or payment networks.
The four basic components of xCurrent are:
- Messenger – xCurrent Messenger will enable the exchange of information between connected RippleNet financial institutions. This includes information on risk and compliance, fees, exchange rates, payment details, and when funds are delivered.
- Validator – A Validator cryptographically confirms the success or failure of a transaction and coordinates the flow of funds across ledgers. Financial institutions can run their own Validators or rely on third-party Validators.
- ILP Ledger (IPL Ledger) – The ILP ledger is formed when the ILP is implemented in an existing bank ledger. The ILP ledger, as a sub-ledger, will be used to track the credit, debit and liquidity of the parties to the transaction. And the ILP ledger enables transaction parties to settle funds atomically, which means that transactions are either settled in a timely manner or terminated immediately.
- FX Ticker – FX Ticker is used to define exchange rates between trading parties. It will also keep track of each ILP ledger that has been set up.
Although xCurrent is primarily designed for fiat currency transactions, it can also support cryptocurrency transactions.
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xVia
xVia is an API-based standardized interface that will allow banks and other financial service providers to interact within the same fabric without relying on multi-payment network integrations. xVia will allow banks to create payments with other partner banks (connected to RippleNet) and allow banks to attach invoices or other information to transactions.
Conclusion
When Bitcoin is hailed as the number one cryptocurrency and Ethereum is also recognized as the creator of smart contracts, we can think of the Ripple network as a currency exchange system focused on global payment solutions.
RippleNet can be implemented on banks’ existing infrastructure to complement and improve traditional payment systems. xCurrent will enable cost-effective and real-time payments across financial institutions, xRapid will use the borderless currency XRP as an on-demand liquidity pool, and finally xVia will facilitate integration and communication between RippleNet participants.
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April 24, 2024
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